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R. Chennayya Vs. T. Janikamma - Court Judgment

LegalCrystal Citation
Subjectcontract
CourtChennai
Decided On
Reported inAIR1944Mad415
AppellantR. Chennayya
RespondentT. Janikamma
Cases ReferredAuryaprabhakara v. Sanyasi A.I.R.
Excerpt:
- - was not satisfied that a partnership had been entered into. clearly the position of a partner in an illegal partnership is very different from that of a humble subscriber to an illegal chit fund. but although the section applies in general to void contracts as well as to voidable ones, it does not apply to contracts that are illegal......can only be done, however, when the money is not tainted with the illegality of the contract. the money held by a stakeholder is one example. in the case dealt with in venkataraju v. ramanujam a.i.r 1918 mad. 163, the sum of money in question was not paid in pursuance of the illegal contract but by way of security. the return of the money was refused in ramanayudu v. seetharamayya a.i.r l935 mad 440. in sesha ayyar v. krishna ayyar a.i.r. 1936 mad. 225, the money was returned only on the ground that section 84, trusts act, would apply, while in auryaprabhakara v. sanyasi a.i.r. 1925 mad. 885 the money was returned because section 65, contract act, applied. moreover, in this case, the sum of money no longer exists; for in pursuance of the contract, the money advanced by the appellants.....
Judgment:

Horwill, J.

1. It has been found by the Courts below that the appellants and others entered into a contract under which each was to advance a certain sum of money to defendant 1, who was to bid at an abkari auction sale to be held on that day, and as consideration for the money paid by them, they were to share in the business which defendant 1 was to bid for. Defendant 1 did bid, and he conducted the business and - it is said - made profits. The plaintiffs brought the present suits for the dissolution of the partnership and accounts. Both the Courts below held that the contract was illegal and could not be sued on. The first Court, however, granted them relief under Section 65, Contract Act. The appellate Court dismissed the suits in toto. It is argued here that where the contract is entered into before the auction, it is not a contract which infringes the provisions of the Abkari Act and can therefore be sued on. It is only contracts entered into after the auction takes place, it is contended, that are illegal; because they amount to transfers of the interests of the licensee. This question has been considered by very many Judges on various occasions. Venkatasubba Rao and Venkataramana Rao JJ., sitting separately, held. that that distinction could be made; but other Judges whose judgments have been referred to - Wadsworth, King and Krishnaswami Ayyangar JJ. - held otherwise. In Ramanayudu v. Seetharamayya A.I.R l935 Mad 440, the question was with regard to a partnership which was established after the auction sale; but there can be no doubt that the learned Judges were of opinion that any partnership without sanction, whether entered into before the auction or after it, would be illegal. Beasley C.J., who delivered the judgment of the Court, in discussing a judgment of Reilly J. to the effect that it was not illegal for persons to enter into a partnership for the purpose of carrying on a toddy shop business observed : 'That is quite true if it is intended at a future date to get a licence in the names of all the partners.' Venkatasubba Rao J., who delivered his judgment shortly after this decision, was considering a case similar to that under consideration here. He relied upon a judgment of Anantakrishna Ayyar J. and said that the Full Bench had not dissented from it. The Full Bench, however, distinguished it on the ground that Anantakrishna Ayyar J. was not satisfied that a partnership had been entered into. Venkatasubba Rao J. was aware that his decision was not in accordance with the reasoning in the Full Bench case, but he did. not follow it because he was not bound to do so; for the point that directly arose for decision in the Full Bench case was different from the point in the case before him. The matter has, however, now been set at rest by the decision of a Bench of this Court in O.S.A. No. 18 of 1942, : AIR1944Mad295 in which the decision of Krishnaswami Ayyangar J. was in substance upheld. In considering the judgment of Venkatasubba Rao and Venkataramana Rao JJ., it was pointed out that the learned Judges had overlooked the wider question of public policy and that it did not follow, because there was no transfer of interest, that the partnership would be a lawful one. The learned Judges say : 'There can be no doubt that, on the decisions of this Court, the partnership between the plaintiff and the defendant would have to be declared unlawful ab initio if a full disclosure of the position had not been made to the Revenue authorities;' and because the partnership was not subsequently sanctioned, the learned Judges refused to allow the plaintiff an account after the time when it was found that the partnership was. illegal. So there can be no doubt that this question was decided in this Original Side appeal and that this case is an authority on the point now before me; because it was necessary for the determination of the matter before the Court.

2. It is argued, on the authority of the Full Bench decision in Sesha Ayyar v. Krishna Ayyar A.I.R. 1936 Mad. 225 that the plaintiff was entitled to a refund of the capital advanced under Section 84, Trusts Act; but the point raised in this case was whether a subscriber to an illegal lottery was in pari delicto with the organisers of the chit fund. Clearly the position of a partner in an illegal partnership is very different from that of a humble subscriber to an illegal chit fund. It seems to me quite irrelevant that the appellant played but a minor part in the actual partnership business after the licence had been taken. His guilt lay in becoming a member of the illegal partnership in the first instance, when he was equally to blame with the other partners.

3. Section 65, Contract Act, was also invoked for the purpose of procuring a refund of the money advanced by the appellant; but although the section applies in general to void contracts as well as to voidable ones, it does not apply to contracts that are illegal. In Venkataraju v. Ramanujam A.I.R 1918 Mad. 163, the question was apparently whether a person who had entered into a wagering contract and had given a certain sum of money by way of security for the fulfilment of his agreement, was entitled to receive that money back again. It was held that he was; but at the same time the learned Judges said that Section 65, Contract Act, did not apply. In Auryaprabhakara v. Sanyasi A.I.R. 1925 Mad. 885, Contract Act, was invoked. There, although the contract was found to be illegal; yet the money was ordered to be refunded. From one point of view, however, the contract was merely void and not illegal; because it purported to transfer a right in land that might never come into existence-a transfer of a mere expectation of property. In such a case, Section 65 would apply. Finally, on the authority of Venkataraju v. Ramanujam A.I.R 1918 Mad. 163, it is argued that even though Section 84, Trusts Act, and Section 65, Contract Act, will not apply, there is a general principle of law whereby a person who has money which belongs to another, can be made to return it. That can only be done, however, when the money is not tainted with the illegality of the contract. The money held by a stakeholder is one example. In the case dealt with in Venkataraju v. Ramanujam A.I.R 1918 Mad. 163, the sum of money in question was not paid in pursuance of the illegal contract but by way of security. The return of the money was refused in Ramanayudu v. Seetharamayya A.I.R l935 Mad 440. In Sesha Ayyar v. Krishna Ayyar A.I.R. 1936 Mad. 225, the money was returned only on the ground that Section 84, Trusts Act, would apply, while in Auryaprabhakara v. Sanyasi A.I.R. 1925 Mad. 885 the money was returned because Section 65, Contract Act, applied. Moreover, in this case, the sum of money no longer exists; for in pursuance of the contract, the money advanced by the appellants was utilised in the (business. On no ground, therefore, can the plaintiffs to any extent succeed. The appeals are dismissed with costs. Advocate's fee in S. A. No. 1213 only.


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